America's charitable institutions are struggling to see past a lingering cloud of smoke.
More Americans than in recent years are now among the needy. Many have lost jobs or suffered other financial setbacks with the onset of a serious economic slump.
True, the Sept. 11 terrorist attacks triggered a wave of charitable giving. But its range of recipients has been somewhat limited, its distribution controversial, and perhaps most important, its continued duration is in question.
Last year, corporations, foundations, and individual donors contributed some $203 billion to charities (see chart, page 12). That represents a roughly 7 percent rise from 1999.
Whether charities post an increase in income this year won't be known until final figures are tallied many months from now, says Patrick Rooney, chief operating officer and research director of the Center on Philanthropy at Indiana University in Indianapolis. His estimate: While 2001 will not be a "spectacular year," donations should again be somewhere around the $203 billion level, probably slightly higher. In more normal years, where there is no political or military crisis and no recession, charitable giving tends to rise about 7 percent, he says. But even in years of recession, the amount goes up in unadjusted dollar terms, usually about 5 percent.
"The economy is faltering, and giving closely mirrors the economy," says Daniel Borochoff, president of the American Institute of Philanthropy.
Still, as Americans spend more time with their families and think more deeply about their long-range priorities, as they now appear to be doing, Mr. Borochoff says, "that should hearten the philanthropic impulse."
One problem affecting many charities this holiday season - the most important time for contributions - is that much of the recent giving (about $1.4 billion) has gone to New York-linked charities collecting money for families of Sept. 11 victims. As a result, nonprofits not related to the tragedy may have difficulty raising money the rest of the year (story, page 15).
New York contributions have clearly presented other special challenges. Money is only now starting to reach recipients. In part, the current outflow follows criticism directed at one of the largest philanthropic agencies: the American Red Cross.
The agency reportedly was not disbursing all of the more than $500 million in contributions made to victims of Sept. 11. Instead, it decided to hold onto more than $200 million in case of future attacks or for preparedness programs.
Now, the Red Cross has replaced its top officer, and officials say they have opened the tap on all of the funds. The organization has reportedly paid out about $50 million to some 2,600 families. But many families have not yet been contacted by the agency.
Moreover, the city of New York has been slow in getting names of victims to the Red Cross. Last week, the city finally turned over several thousand names after prodding from local news media.
In the wake of the attacks, many new charities have sprung up. So donors need to make sure those charities are legitimate and that donations are channeled properly, says Bennett Weiner, an official of the Better Business Bureaus, Arlington, Va. He lists certain things to watch out for when giving to New York-related activities:
Nationally, many groups continue to solicit funds for New York families through direct mailings, phone calls, or Internet appeals. Donors, says Mr. Weiner, must verify the authenticity of such groups. To determine if a group is recognized as a nonprofit by the IRS, go to www.guidestar.org. The website's database contains more than 850,000 nonprofits.
Be wary of groups that make a generic donation to families of victims. In such cases, Weiner advises donors to find out how much money will reach those families. If you buy items, such as Christmas or patriotic recordings, and sellers promise to make a New York donation, check the contribution level carefully, he says. With cash donations, the charitable group should identify what percentage will benefit recipients. Ideally, that should be 70 to 80 percent or more, Weiner says. If the percentage is lower, consider donating elsewhere.
Determine the nature of the work or payout to donors, and whether the charity interacts with other charities to get the money disbursed. Such information is important because other nonprofits may abide by weaker standards than the one to which you donate.
One major problem donors face is getting reliable information on how charities actually assist donors.
A recent survey of more than 2,000 people by the Better Business Bureaus' Wise Giving Alliance found that Americans are generally perplexed about how giving works, whether a charity is legitimate (70 percent called it "difficult to know"), and what percentage of money reaches the needy. The problem cuts across both income and education lines, says BBB official Bennett Weiner.
But the biggest concern donors have involves privacy. "People want to ensure that their names are not indiscriminately given out to other charities or other organizations without their permission," he says.
Currently, few legal restrictions prevent nonprofits from sharing donor lists with others, Mr. Weiner says.
Another survey finding: Only 6 percent made an online charitable donation of at least $10. And just 22 percent said they might be willing to do so in the future, assuming privacy concerns are met.